‘Double Eagle’ Gold Dispute Harkens to Last U.S. Default in 1933

A striding liberty figure is depicted on one of the Double Eagles at the heart of the federal trial. Source: U.S. Mint via Bloomberg

July 11 (Bloomberg) -- The 10 rare Double Eagle gold coins
at the heart of a federal trial in Philadelphia are remnants of
the last U.S. government default, almost eight decades before
the current stalemate in Congress over raising the debt limit.

The daughter of a Philadelphia jeweler found the coins in a
family safe-deposit box in 2003. The coins were confiscated by
federal authorities. None were issued to the public after
minting in 1933, the year President Franklin D. Roosevelt made
it illegal for citizens to own gold and told investors that the
government wouldn’t repay bonds with the metal. In 2002, a
single Double Eagle fetched a record $7.59 million at auction.

Joan Langbord’s lawsuit to reclaim the coins is stirring
passion among the numismatic community at a time when gold is
near a record reached in May and has rallied every year for a
decade. President Barack Obama and congressional leaders have
failed to reach a compromise on reducing deficits and raising
the $14.3 trillion federal debt ceiling before the government
exceeds its borrowing authority on Aug. 2.

“The government is broke and, eventually, they will dig
into everyone’s pockets,” said Tobina Kahn, the vice president
of House of Kahn Estate Jewelers in Chicago. “Anyone who puts
money into gold coins has no confidence in the government or
fiat currencies.”

Gold has rallied 9 percent this year and reached a record
$1,577.40 an ounce on May 2 as the U.S. kept borrowing costs at
a record low and purchased Treasuries to help boost the economy.
Gold priced in euros was the highest ever today as investors
sought a haven against declining currencies amid Europe’s
sovereign-debt crisis.

Melted at Mint

A single 1933 Double Eagle believed to have once belonged
to King Farouk of Egypt sold at auction in 2002 for $7.59
million, according to the court filings. The government minted
fewer than 500,000 of the $20 coins in 1933, and all were
ordered to be melted, according to the U.S. Mint.

Langbord believed the coins belonged to her father, Israel
Switt, according to the filings. The government, in a court
filing, said the Secret Service in 1944 investigated “Switt’s
involvement in the apparent theft of 1933 Double Eagles from the
Mint.” The U.S. Attorney’s Office declined to prosecute Switt,
citing the statute of limitations.

The family gave the Double Eagles to Daniel Shaver, the
chief counsel for the U.S. Mint, saying they wanted to sell the
coins and split the proceeds with the government. Officials
concluded that the coins were authentic and were government
property.

13 Coins

Langbord’s attorney, Barry Berke, didn’t immediately
respond to a message for comment. Patty Hartman, a spokeswoman
for the U.S. Attorney’s Office in Philadelphia, said the trial
is expected to last two weeks.

Thirteen of the Double Eagles are known to exist, according
to Robert W. Hoge, the curator of North American Coins and
Currency at the American Numismatic Society. Besides the 10
coins on trial in Philadelphia, the Smithsonian has two and the
King Farouk coin is currently on display at the Federal Reserve
in New York.

The coins, which have less than an ounce of gold in them,
were “too expensive for most people to consider collecting them
at the time they were minted,” Hoge said. “There’s so much
history with these coins. The gold value of the piece is minimal
compared to its historical value.”

Double Eagles were minted during the Depression, when
Roosevelt was trying to prevent hoarding of gold and a run on
bank deposits. The coin depicts an eagle with spreading wings on
one side and the other has the image of a woman portraying
liberty as designed by Augustus Saint-Gaudens that had been in
use since 1907. In 1986, the same design for liberty was chosen
for American Eagle Gold Coins.

Confiscation Unlikely

It’s unlikely that the government of today would confiscate
private gold holdings as it did in 1933, said Michael Haynes,
the chief executive officer of American Precious Metals
Exchange, an online bullion dealer.

“Unlike the period to the 1930s, the U.S. currency is not
now convertible into gold and silver,” so the circumstances
that led to Roosevelt’s order don’t exist, he said. APMEX sales
are headed for a record year and may be up more than 67 percent
from a year earlier.

The case is Langbord v. U.S. Department of Treasury, 06-cv-5315, U.S. District Court, Eastern District of Pennsylvania
(Philadelphia).